The "jeonse" price of apartments in Seoul has increased by 24 million won ($19,500) over the past year, a rapid hike in an uptrend continued over the past few years sustained by soaring demand, as an increasing number of people opt out of buying homes amid regulatory uncertainty.
Jeonse is a way of renting a home whereby tenants pay a lump sum as a deposit instead of monthly rent.
Data from KB Liiv ON, a real estate information service provider affiliated with KB Kookmin Bank, showed the jeonse price of apartments in Seoul in May stood at 486 million won, up 24.1 million won, or 5.2 percent, from a year earlier. The figure is up by 36.7 million won from two years earlier.
The hike was led by Gangnam-gu where the year-on-year jump was over 80 million won, or 11.6 percent from a year earlier. Two other areas in southern Seoul, Seocho-gu and Songpa-gu, saw 48.9 million won and 35.9 million won increases, respectively. Gwangjin-gu, Seongdong-gu, Seongbuk-gu and Yangcheon-gu reported increases between 32 million won and 28 million won.
The amount of money needed to get an 84-square-meter apartment in Seoul via jeonse averaged 785 million won in Gangnam, 733 million won in Seocho and 544 million won in Songpa.
The district with the cheapest jeonse price in Seoul was northeastern Dobong-gu where 333 million won was needed to get an apartment of the same size.
Korea Appraisal Board data showed the jeonse price uptrend has been on a steady rise for the past 47 weeks, increasing by 2.98 percent from the first week of July 2019.
The sales price of apartments in Seoul declined 0.08 percent from December 2019, following the government's stricter rules aimed at curbing housing prices, most notable of which was the levying of heavier taxes on owners of multiple homes.
This contrasts with the 0.91 percent hike of the jeonse price, driven by a 4.45 percent increase reported by three areas in the Gangnam and neighboring Gangdong area.
The jeonse price uptrend will continue due to the uncertainty surrounding government regulations and overall market slowdown following the COVID-19 pandemic, according to a market expert.
"Many people are essentially being forced to rent using jeonse rather than buying a home, because they consider predicting market trends meaningless as of now," said Lee Young-soo, a professor of real estate at Seoul Digital University.
"People in need of homes are waiting for the market to recover and waiting to see how the government regulations will materialize."
Advancing the view is a drop in supply. According to data from the Ministry of Land, Infrastructure and Transport, some 36,000 new homes will be available in Seoul in 2021, only 67 percent of the 53,000 expected to be made available within 2020.
"A decrease in supply would mean an increase in demand, leading more people to delay buying a home and renting for a couple more years," Lee said.